It's a bit odd, and hard to imagine it working that well, since mortgage rates are famously low already, and nobody seems to care. In fact, mortgage applications have been plunging lately -- obviously rates are not the problem.

But, really, this is the tool the Fed has (buying more stuff) and if there's any water to be squeezed from the stone, then perhaps the thinking is: Why not?

Or, perhaps, if the Fed buying were coupled also with a nationwide refi scheme then you might actually be able to reduce the monthly checks that homeowners make, and actually get somewhere.

Also worth noting is that this whold discussion coming out today seems to be keying off a speech made by Fed Governor Daniel Tarullo at Columba, where he said, according to Bloomberg:

“We should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities... The aggregate demand effect should be felt not just in new home purchases, but also in the added purchasing power of existing homeowners who are able to refinance.”